Correlation Between SentinelOne and Applied Materials

Can any of the company-specific risk be diversified away by investing in both SentinelOne and Applied Materials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SentinelOne and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SentinelOne and Applied Materials, you can compare the effects of market volatilities on SentinelOne and Applied Materials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SentinelOne with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SentinelOne and Applied Materials.

Diversification Opportunities for SentinelOne and Applied Materials

0.84

Correlation Coefficient

SentinelOne  Applied Materials

Very poor diversification

The 3 months correlation between SentinelOne and Applied is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and SentinelOne is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SentinelOne are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of SentinelOne i.e., SentinelOne and Applied Materials go up and down completely randomly.

Pair Corralation between SentinelOne and Applied Materials

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, SentinelOne is 1.06 times less risky than Applied Materials. The stock trades about -0.11 of its potential returns per unit of risk. The Applied Materials is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  16,326  in Applied Materials on December 30, 2024 and sell it today you would lose (1,820) from holding Applied Materials or give up 11.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

SentinelOne  vs.  Applied Materials

SentinelOne

Risk-Adjusted Performance

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Applied Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SentinelOne and Applied Materials

The main advantage of trading using opposite SentinelOne and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne position performs unexpectedly, Applied Materials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Applied Materials will offset losses from the drop in Applied Materials' long position.

The idea behind SentinelOne and Applied Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.